Retail investors reignite faith in US markets as optimism returns

Retail investors are pivoting back to US markets after two straight quarters of pulling away, suggesting growing confidence in the strength of the American economy, even as caution lingers at home.

Of the 10,000 investors surveyed across 12 countries, 38% now see the US as offering the best long-term returns, a 12-point jump from the previous quarter which reverses earlier declines.

eToro’s latest Retail Investor Beat survey findings also suggest that exposure is climbing too with 43% of investors now holding US assets, the highest since tracking began in early 2023.

“Earlier this year, heightened concerns around political instability and macroeconomic uncertainty in the US prompted retail investors to diversify more aggressively into Europe and emerging markets,” says eToro Global Market Strategist Lale Akoner. “Now, as confidence in the resilience of the US economy improves, we’re seeing a reversal of that trend.”

While sentiment toward the broader US market has brightened, optimism surrounding the Magnificent 7 tech firms is cooling as just 13% of respondents expect Amazon, Apple, Microsoft, Meta, Tesla, Nvidia, and Alphabet to significantly beat the wider market in 2025, while 33% expect only modest outperformance.

More investors are trimming their positions in these stocks than a year ago, with Tesla seeing the sharpest shift. Six percent more respondents now plan to avoid or sell the electric-vehicle maker’s shares.

“The latest data show retail investors are trimming exposure, not because they doubt the long-term potential of these companies, but because overreliance on a handful of tech giants leaves portfolios vulnerable in a volatile environment,” adds Akoner. “Investors are acknowledging the Mag 7’s strength while actively rebalancing to improve diversification. It reflects a maturing mindset among retail investors – moving from chasing performance to managing risk more strategically.”

Despite hedging activity, faith in the US dollar remains strong with half of retail investors having adjusted or planning to adjust portfolios to guard against possible long-term weakness in the currency.

However, 83% still expect the dollar to remain the world’s reserve currency for at least the next decade.

“The US dollar has been the world’s primary reserve currency for over 70 years,” Akoner notes. “Despite the USD seeing a decline of around 9% this year, retail investors still firmly believe in the USD’s pivotal role as a global reserve currency.”

Concerns about a worldwide recession have eased, dropping to 23% from 26% in the previous quarter, while inflation remains the second-biggest fear at 19%.

Worries closer to home are building with 14% of investors now seeing their domestic economy as the main risk, up from 11% in Q2, although in the US, the figure doubles to 28%.

“Fewer investors now view the global economy as the biggest risk to portfolios,” Akoner says. “Yet this optimism doesn’t extend to the domestic picture. US investors remain concerned about their own economy, reflecting proximity to political and policy decisions that amplify perceptions of risk.”